Coffee Caps Monthly Slump; Sugar Declines; Cotton Rallies

01/06/2012 
 

BLOOMBERG (USA)
 
Coffee futures fell, capping the longest monthly slide in 31 years, as global supply outpaces demand, while slowing economies erode consumption prospects. Sugar also dropped. Cotton, cocoa and orange juice rose.

Global coffee production will rise to 134.3 million bags in the season that started in October in most countries, up from a previous forecast of 132 million bags, Winterthur, Switzerland- based trader Volcafe said May 28. World consumption climbed 1.7 percent in 2011, below the average of the past 12 years, as higher prices curbed demand in some regions, according to the International Coffee Organization in London.

“Demand is off and production is proving to be much better than expected,” Judy Ganes-Chase, the president of J. Ganes Consulting in Katonah, New York, said in an e-mail.

Arabica coffee for July delivery dropped 2.3 percent to settle at $1.6065 a pound at 2 p.m. on ICE Futures U.S., after touching $1.6015, the lowest for a most-active contract since July 22, 2010. The commodity sank 11 percent in May, the sixth straight drop and the longest slump since November 1980.

Last week, the Brazilian real weakened to a three-year low against the dollar, bolstering prospects for higher exports from the South American nation, which is the world’s top producer of coffee, sugar and orange juice.

Increased output, softening demand and a falling real “seems to me to be a winning recipe for lower prices and more downside to go,” Ganes-Chase said.

Coffee’s decline today trailed only soybeans among the 24 raw materials tracked by the Standard & Poor’s GSCI Spot Index, which was down 13 percent for the month, the biggest drop since 2008.

“Macro-economic uncertainty remains a major driver in the coffee market, impacting currency relationships and potential future demand,” analysts at Rabobank International, led by Luke Chandler, said today in an e-mailed report.

Raw-sugar futures for July delivery slid 0.3 percent to 19.42 cents a pound in New York, posting a monthly decline of 8 percent, the third in a row.

Cotton futures for July delivery rose 0.9 percent to 71.55 cents a pound on ICE, reducing its monthly slide to 20 percent, the biggest since April last year.

Cocoa futures for July delivery climbed 0.6 percent to $2,083 a metric ton on ICE, trimming this month’s losses to 6.1 percent.

Orange-juice futures for July delivery advanced 1.1 percent to $1.1205 a pound. Still, the beverage plummeted 21 percent in May, the biggest decline since February 1999.

In London futures trading, robusta coffee also slid on NYSE Liffe. Refined sugar and cocoa increased.

A bag weighs 60 kilograms, or 132 pounds.